LONDON (Oct 17): Gold edged down on Friday as shares rebounded, although it was set for a gain for a second straight week as concerns over the global economy raised speculation the U.S. Federal Reserve could keep interest rates low for longer.

Spot gold was down 0.1 percent to $1,236.90 an ounce by 0951 GMT. The metal is up about 1.4 percent for the week after reaching a one-month high of $1,249.30 on Wednesday.

"There has been a move down in the dollar and equities this week, but in comparison the upside in gold has been relatively modest," ABN Amro analyst Georgette Boele said.

"People are still cautious on gold. They buy it when there is some risk aversion, but in the end when wider sentiment improves you see the metal struggle."

The dollar rose 0.1 percent versus a basket of currencies, but was on course for its biggest two-week loss since September 2013 after Fed officials warned at the weekend that if the global recovery stumbled, the bank could delay an increase in U.S. interest rates.

Before that, bets had increased that the Federal Reserve would raise rates in mid-2015.

The market will focus on a speech by Fed chair Janet Yellen due later on Friday.

Gold has benefited from the low interest rates and increased central banks' liquidity that have prevailed in the years after the 2008 financial crisis.

On Thursday, the head of the St. Louis Federal Reserve Bank, James Bullard, said the central bank may want to keep up its bond-buying stimulus for now, given a drop in inflation expectations.

European stocks on Friday clawed back some of this week's losses after solid U.S. data on Thursday calmed turbulence in global financial markets, though underlying worries about slowing world growth kept investors on edge.

In a sign of higher investor interest, SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, said its holdings rose 0.2 percent to 760.94 tonnes on Thursday.

In top buyer China, premiums recovered slightly to $2-$3 an ounce from $1-$2 overnight, indicating higher demand and supporting global prices.

PLATINUM, PALLADIUM REBOUND

Among other precious metals, platinum and palladium rebounded from heavy losses on Thursday.

Both metals have slid due to concerns about global growth and weak equity markets, HSBC said in a note. But the lower prices could also lead physical buyers to look for bargains.

"Although we saw no evidence of industrial or end-user buying on Thursday's price drop, we anticipate that physical buying will materialize should the market decline further."

Platinum was up 1.1 percent at $1,274.52 an ounce. On Thursday, it fell below the price of gold for the first time since April 2013 before paring some losses to close down 1.3 percent.

Palladium rose 1.4 percent to $744.30 an ounce, after falling as much as 5 percent to its lowest since Feb. 27 in the previous session.

Spot silver was up 0.1 percent at $17.37 an ounce.